Question from a reader: ”Hello, Kim. With this current economy, I am getting pretty disgusted and am asking myself if I should stay in business. From a lifestyle point of view, the income I am making isn’t that great and I am ready for retirement. Any thoughts? Thanks.”
My answer is if you don’t have any pressing health, family or other issues other than disgust, my motto is when in doubt, gut it out. Your question was a unique enough one to get posted because I don’t generally get a lot of ones where people are making money and are asking if they should stop making it.
One of the first things I will ask is have you made sure that your lifestyle can adapt to the new changes in getting less money? People always think they can live on less but one of the first things that happens when people are out of work is that they use all the free time they have and start spending. Or they start to travel to all the places they wanted to go to. Remember that travel costs money and if you are denying yourself the flow from the faucet of your business you may not be able to continue to live in the life style that you have grown accustomed to be use to.
Other questions you need to ask yourself are:
Is this feeling of disgust a temporary thing because of the economy or have the years, nay, decades finally increased their toll and you want to stop spinning your feet in the rat race?
How profitable in terms of income are you in your business that you are willing to walk away from it? Is there anything that you can do to maybe sell off a portion of it or have a relative help for awhile while you take a break? If something is a success and you are tired from working on it, that isn’t always a good reason to want to dump it.
Have you ever taken a vacation from work? If not, re-read my question above and seriously think about taking a break before you sever the cord with your income stream completely. There are countless people who are basically workaholics and that is another serious problem with the Depression we are in. These people have had to change gears and for some of them upon being laid off it has added years to their lives but they gotcha is that they still need to have money to take care of themselves and their families. Mortgages generally don’t pay themselves unless you have paid for the emergency insurance thingies that they sell if you get laid off.
Do you have a list of hobbies or things that you have been dying to do? If so, that is great and that can be something to keep you busy especially if you are a type A personality – you know, a go-go type of person who has to be doing something all the time.
Once an income stream is shut off, it may be very hard in this current economic Depression to get it back flowing. You stated that your income that you aren’t making isn’t that great but it is still something and not knowing how much you have in retirement, I have no way of knowing how that is in relation to the rest of your finances.
For example, if you are making $100,000 a year with your business, that may not be great for somebody like Donald Trump or the late Michael Jackson because of the cash burn that they go through but that certainly sounds like good money (unless your expenses are $120,000 a year) in relation to me. That leads to the next few questions – and these are the same questions I would have anybody who is ready to retire or get rid of a business think about:
How are you in terms for saving and assets? Are all your debts paid off or under control? Are you able to hit your monthly bills or are they at a minimum and your savings and social security can cover it?
How are your loved ones, specifically your spouse or wife if you have one reacting to this? Is she on board or will she want to tear your throat out after the two of you are home together for more than three days? The general rule is that after three days with relatives or friends you need to separate for at least a few minutes to regain your center and sense of self. The theory is also known as the Bad Fish Theory. It means relationships, as loving and profitable as they are, tend to become stinky like bad halibut after three days so you need to go air yourself (or them) out. When I took a vacation years ago with my sister to Italy we actually lasted five days in close proximity before we had to take a brief time out to get our batteries recharged. Don’t get me wrong, some people and couples work super together 24/7. I am not one of those people normally and most people I know aren’t either.
Now we come to some questions closer to the liquidation or distribution of your business:
Have you talked with a tax professional about what it would take to shut your gig down?
Is your business complicated enough where you still may need to plan a year or two in advance to cover license renewals, tax liability questions and any other issues that managed to keep you in the green for the years and in good graces with the IRS and any respective state, county or city taxing authorities? A friend of mine discovered to his chagrin when he was trying to close his bagel store that because he was in a corporate entity he needed to keep the corporation open another year to completely insure that he clear his books and close out cleanly. By staying open the extra year he was on the hook at the time for the California State minimum Corporation tax at that time and that was $800 among other expenses he was still having to deal with.
Make sure that you are going to recapture any depreciation that is outstanding and that you haven’t completely taken. Remember all those great things in the business you were legally depreciating that helped keep you profitable by lowering your taxable liability down? Well, you need to account for them when you shut down your business. Have your accountant or tax guy/gal go through the items especially if you have a lot of items that you were depreciating. You can expect the IRS and state taxing authorities to look through everything as well when you are closing your business.
Even though it goes without saying, you should tell your suppliers that you are closing the doors. That is, unless you aren’t selling the business. If you are selling the business, make sure that the contract states exactly and specifically what gets transferred over and what kind of support you will plan to do and for how long. A lot of people (some of my tax clients in fact) have sold businesses and gone back on board as employees for their previous company because they still wanted to keep their hand in the business, wanted an income stream and realized that they would be bored in their retirement.
That is another point that I can’t stress enough. Make sure you are busy. Some people have tons of hobbies and there aren’t enough hours in the day. The late television celebrity and former host of the Tonight Show, Steve Allen was a musician, writer and entertainer and he was still cranking out books even after he had “retired”. Because of medical advances and overall good living conditions, you can expect to have a longer time alive so you will need more money to survive and need to keep busy for many more days. As sweet as your grandchildren are, they may not want to be around you all the time as they get older and want to start dating..
The expectation for the future in terms of interest rates should be, based on what we have right now, that eventually, they will go up and that we should have some nasty inflation. For the short term to intermediate term, my humble opinion is that for at least a few years, rates will be low because we have too much unemployment and any more slabs of concrete on the American worker’s back will pretty much bury our financial economy. I wouldn’t count on high interest rates any more than a lot of millionaires who were living off their interest payments who are now finding that they are needing to dip into their principal to survive.
Make sure that you are adjusting your lifestyle to handle the loss of the income stream. I cannot stress that enough. Seriously. I see too many clients who are back in the credit card trap or have maxed out their lines of credit in order to live a lifestyle that they can’t and shouldn’t be living because they felt that they were denying themselves their entire lives. You can still live some of your dreams, just go about realizing them prudently. Take some time and look for ways to cut costs and scale back some of the things that you wanted to do. You can still scale the Alps or go paragliding through the Amazon but you probably don’t want to do both in the same year and you may want to space out the trips so that you can check your savings in between in case you end up needing the money.
Let us also remember to make sure that our medical insurance and any other policies are set up and in force before we stop working. The worst thing that can happen is if, God Forbid, you get in an accident and are in trouble that you don’t have enough money in savings to cover your medical bills. A stay alone in the hospital overnight can run into thousands of dollars and a lot more depending on the kinds of tests that need to be performed. As we age we normally are not getting healthier and the chances are that sooner or later you may need a doctor visit on an emergency basis, if nothing else to take the shark off your foot from scuba diving in the Great Barrier Reef.
Have I hammered home enough information and questions that you should be asking
Whatever you decide, I wish you the best and I am sure there are a lot of my readers who are envious of your situation. Take care everybody and keep those questions coming in. Remember that the search engines can get you an answer but it might not be the right one for you.
For those of you who have been curious as well, I am working on my next book. It is coming along a lot slower than I would have hoped but I have been pretty busy with things lately.
Remember my bees? I still have some stragglers and I have moved the worm bins off to the side of the house, sprayed the bins and hopefully that will keep the few remaining stragglers (like 30 of them still) from hanging around. There must be something in the air or the pollen that makes my property Bee Boulevard (no bee trucks allowed).
Getting back to the book. This particular one, without going into too much detail yet is in response to readers who want me to get more into gaming again. This time around I will touch a little on video gaming and board types of recreation. In this current economy, people are turning to escapism more than ever to things that can completely make them forget their financial woes. There is a resurgence in board games, home card games and of course, there hasn’t been a slow down in video games. The lower end games and apps seem to be doing well (think iPod and iTouch downloads as well as the shareware versions of small, tightly written puzzle games and different twists on the FPS (first person shooter) games.
For college age (or even high school age) readers, if you have the programming chops, you may want to get some development (dev) kits and try your hand at writing video games or apps. It is a great way to make some passive income stream money and a fantastic calling card to have out there when you are looking for a job.
I am still also on my manufacturing bandwagon. If anybody has any manufacturing ideas or cash they want to get started in the Southern California area, please give me a call or drop me a note. There is plenty of opportunity that is out here. You don’t have to go to Asia or out of the United States to find places to make quality products inexpensively.
July 13, 2009
Hey, don’t go anywhere yet. Having some tax issues or tax questions? Any problems with trying to make it through the financial Depression we are in that is making you depressed? Please read on.
I am expanding my practice and taking on new tax clients. If you are interested in having somebody who is a successful businessman and tax professional with integrity review your returns discretely and see if your tax guy or gal is doing a good or goofy job, please drop me an email or post a comment with your contact information and time.
I have experience in international business, small businesses, partnerships, multi-state tax returns (they can get complicated) and anything else you can probably think of.
I also do business consulting and have ran several businesses (still running a few) myself so you are in good hands.
If you are looking for a day job, part time work, suggestions for saving money or investing, please check out my book, Practical Money Making, that is listed right after his paragraph in this very post. There are some great suggestions and ways to survive the Depression we are in.
Interested in any of my books? You may want to make a stop over here. Please click through to purchase my books and some other interesting items that actually ARE on sale.
Have you read my book, “Bad Tax Idea, Good Tax Idea“? Please order it today. The tips inside can save you hundreds if not thousands of dollars! Tax planning should be done year round and not just two weeks into January or later.
Part of all the proceeds from the sales of that book go to Rett Syndrome research. One girl is born with Rett Syndrome worldwide every fifteen minutes. My daughter Arianna has Rett Syndrome and we are working to do all we can to make her life easier and find a cure in her lifetime. Boys born with the Rett gene generally die at birth.
Kim Isaac Greenblatt
When In Doubt, Gut It Out